According to an SEC filing, Diamond Offshore Drilling (NYSE: DO) has decided not to make the semiannual interest payment due for its 5.7% senior notes. DO stock is currently down over 20% in pre-market trading. It should be noted that Diamond does have a 30-day grace period before the official default, but investors are not optimistic. Update: Diamond Offshore Drilling has declared bankruptcy.
Diamond Offshore Drilling is headquartered in Houston, Texas, and a subsidiary of Lowes Corporation (NYSE: L). DO provides drilling services for oil and gas companies and government that includes a fleet of 15 offshore drilling rigs.
DO stock has currently lost over 87% of its value from its highs. The extreme drop of DO started in August of 2019 with a 40% drop in stock price and corrected, only to drop nearly 80% in 2020.
Diamond Offshore Drilling Outlook
Many investors bought Diamond (DO) stock and notes because of the high-interest payments. Stock investors thought the need for oil would increase. Unfortunately, the massive supply and oil price war has destroyed Diamond’s core business. This has led to the collapse of DO stock and its ability to pay debt.
This has led to Moody’s downgrading senior notes to Caa2. “The downgrade of Diamond’s ratings reflects lower earnings and higher negative free cash flow in 2020 than we previously expected, combined with few signs that offshore drilling fundamentals are going to greatly improve anytime soon,” commented Pete Speer, Moody’s Senior Vice President. “Without a much more robust improvement in dayrates, Diamond’s debt burden will become untenable.”
Diamon Offshore Lawsuit
Financial advisors that sold Diamond Offshore Drilling are getting claims filed against them by clients. Haselkorn and Thibaut, a national investor law firm, has started an investigation in the sales practices of financial advisors that sold energy stock and notes to clients. It is alleged that many investors bought high-interest notes without fully understanding the risk or were over concentrated.
Stock Market Today
The S&P futures are higher, up 12 to 13 points. The wold is getting back to work slowly. At least 20 states are opening for business on May 1. President Donald Trump stated he would announce guidelines Today for reopening the economy as data suggests peak coronavirus infections have passed. Democrats unveiled a $30 billion plan to increase nationwide testing for the coronavirus. New coronavirus cases remained below the April 4 peak for the eleventh consecutive day.
What to watch for today
We fully expect to VERY NEGATIVE numbers to come in today. The good news most will happen before the market opens so that it will decrease the swings in the market.
- Preliminary Building Permits for March (8:30 a.m.)
- Housing Starts, Completions for March (8:30 a.m.)
- Philadelphia Fed Index for April (8:30 a.m.)
- Initial Jobless, Continuing Claims (8:30 a.m.)
Evidence-based financial writer with 9 years of experience specializing in earnings, economic data coverage, and bond markets. I combine fundamentals, technicals, and macro to identify low-risk, asymmetric opportunities.